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Exam 13: Multijurisdictional Taxation

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Question 61

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The model law relating to the assignment of income among the states for corporations is:

A) Public Law 86-272.
B) The Multistate Tax Treaty.
C) The Multistate Tax Commission (MTC) .
D) The Uniform Division of Income for Tax Purposes Act (UDITPA) .

E) C) and D)
F) A) and D)

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Question 62

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José Corporation realized $900,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. $\begin{array}{llll}&\textbf{State X} &\textbf{State Z}&\textbf{Totals}\\\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \\\text { Property } & 500,000 & -0- & 500,000 \\\text { Payroll } & 2,000,000 & -0- & 2,000,000\end{array}$ X utilizes an equally weighted three-factor apportionment formula.How much of José's taxable income is apportioned to X?

A) $120,000.
B) $450,000.
C) $780,000.
D) $900,000.

E) B) and D)
F) B) and C)

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Question 63

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The United States has in force income tax treaties with about 70 countries.

Jokerz,a CFC of a U.S.parent,generated $80,000 Subpart F foreign base company services income in its first year of operations.The next year,Jokerz distributes $50,000 cash to the parent,from those service profits.The parent is taxed on $0 in the first year (tax deferral rules apply)and $50,000 in the second year.

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. $\begin{array}{llll}&\textbf{State X} &\textbf{State Z}&\textbf{Totals}\\\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \\\text { Property } & 500,000 & -0- & 500,000 \\\text { Payroll } & 2,000,000 & -0- & 2,000,000\end{array}$ Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

Which of the following statements regarding income sourcing is not correct?

The U.S.system for taxing income earned outside its borders by U.S.persons is referred to as the territorial approach,because only income earned within the U.S.border is subject to taxation.

Twenty unrelated U.S.persons equally own all of the stock of Quigley,a foreign corporation.Quigley is a CFC.

WaterCo,a domestic corporation,purchases inventory for resale from unrelated distributors outside the U.S.It resells this inventory to U.S.customers,with title passing inside the United States.What is the source of WaterCo's inventory sales income?

Which of the following is not a U.S.person?

Which of the following statements regarding the U.S.taxation of non-U.S.persons is true?

Given the following information,determine if FanCo,a foreign corporation,is a CFC. $\begin{array}{lcc}\textbf { Slareholders of}&\textbf { Voting}\\\textbf { foreign corporation } & \textbf { power } & \textbf { Classification } \\\text { Murray } & 24 \% & \text { U.S. person } \\\text { Nency } & 20 \% & \text { U.S. person } \\\text { Otto } & 40 \% & \text { Foreign persor } \\\text { Patricia } & 16 \% & \text { U.S. person }\end{array}$

In which of the following independent situations would Slane,a foreign corporation,be classified as a controlled foreign corporation? The Slane stock is directly owned 12% by Jen,10% by Kathy,12% by Leslie,10% by David,8% by Ben,and 48% by Mike.

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

An assembly worker earns a $50,000 salary and receives a fringe benefit package worth $15,000.The payroll factor assigns $65,000 for this employee.

ForCo,a non-U.S.corporation based in Aldonza,purchases widgets from USCo,Inc.,its U.S.parent corporation.The widgets are sold by ForCo to an unrelated foreign corporation in Aldonza.The income from sale of the widgets by ForCo is Subpart F foreign base company sales income.

USCo,a U.S.corporation,reports worldwide taxable income of $1,500,000,including a $300,000 dividend from ForCo,a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation) ?

The "residence of seller" rule is used in determining the sourcing of all gross income and deductions of a U.S.multinational business.

A unitary business applies a combined apportionment formula,including data from operations of all of the affiliates.

Which of the following determinations requires knowing the amount of one's foreign-source gross income?